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GUIDE TO REGISTER A COMPANY IN VIETNAM

Setting up a business is a seemingly simple matter, but it causes many problems in the process of business registration with the competent authority. With the development of the economy during the Covid-19 pandemic, when developed countries were also heavily affected by the epidemic, Vietnam, on the other hand, developed with a stable growth rate and indicators. positive economic numbers. For this reason, Vietnam has become a hot spot for attracting foreign investment, and the form of foreign investment in Vietnam is mainly through the establishment of enterprises, branch offices, and representative offices. So how do domestic investors in general, and foreign investors in particular, set up businesses in Vietnam? Let’s unravel the procedures for registering a business in Vietnam with Doanh Tri through the following article!

 

Legal basis 

  • Law On Enterprise 2020
  • Circular 01/2021/TT-BKHDT Guidance on Business Registration 
  • Decree 01/2021/ND-CP Guidance on Business Registration 


I. Forms of Business Entity

Before going on to register a company, individuals and organizations must take into consideration which form of business will be the most suitable for them, at the same time, be the most profitable. However, after a period of doing business, if the business owners find themselves not being able to make profits from their current business, then they can change it into other forms of business entity in accordance with the law.

So what are the most common forms of a business? 

  • Private Business 

In accordance with the Law on Enterprise, a private business or a sole proprietorship is an enterprise owned by an individual who is solely responsible for all his/her assets for all activities of the business. Private enterprises are not permitted to issue securities of any kind. Each individual is only entitled to establish one private enterprise. The owner of a private enterprise cannot concurrently be the owner of a business household or a general partner of a partnership. A private enterprise is not entitled to contribute capital to the establishment or purchase shares or contributed capital in a partnership, limited liability company, or joint-stock company.

There are two most notable reasons why some individuals tend to prefer and choose a sole proprietorship or private business over other forms of business entity. As the sole owner of the enterprise, the owner is fully active in deciding issues related to his/her business activities. The unlimited liability regime of the owner of a private business creates trust for partners and customers and helps businesses to be less closely bound by the law like other types of businesses.

One downside of this form of business is due to the lack of legal status, the risk level of the private business owner is high, the owner of a private business must be responsible with all the assets of the business and his own, not limited to the amount of capital that the owner of the business invested in the business itself.

  • Partnerships

According to the Law on Enterprise, a partnership is an enterprise in which: There must be at least 02 members who are common owners of the company, doing business together under a common name (hereinafter referred to as general partners). In addition to general partners, the company may have additional capital contributors; General partners must be individuals, responsible with all their assets for the obligations of the company; Capital contributors are organizations or individuals and are only responsible for the company's debts within the amount of capital they have committed to contribute to the company. Unlike a sole proprietorship, a partnership has legal status, its legal status is valid or acknowledged from the date of issuance of the Certificate of Business Registration. In addition, like a sole proprietorship, a partnership may not issue securities of any kind.

The biggest advantage of a partnership is that it combines the personal reputations of many people. Due to the cooperative and unlimited liability regime of the general partners, the partnership company easily earns the trust of its customers and business partners. The management of the company is not too complicated because the number of members is small and they are reputable people who absolutely trust each other.

On the other hand, Due to the unlimited liability regime, the risk level of the general partners is very high. Capital contributors do not have the right to manage the business, so there are many restrictions on capital contributors.

Usually only applies to businesses operating in specialized fields.

  • Joint-Stock Company (JSC) 

A joint-stock company is an enterprise in which: Charter capital is divided into equal parts called shares; Shareholders can be organizations or individuals; the minimum number of shareholders is 03 and there is no limit to the maximum number; Shareholders are only responsible for the debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise; Shareholders have the right to freely transfer their shares to others, except for the cases specified in Clause 3, Article 120 and Clause 1, Article 127 of the Law on Enterprise.

Clause 3, Article 120 indicates that within 3 years from the date the company is granted the Certificate of Business Registration, the common shares of founding shareholders are freely transferable to other founding shareholders and can only be transferred to persons who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, the founding shareholders who intend to transfer ordinary shares do not have the right to vote on the transfer of such shares.

Clause 1, Article 127 indicates that shares are freely transferable, except for the case specified in Clause 3, Article 120 of the Law on Enterprise and the company's charter which restricts the transfer of shares. Where the company's charter contains restrictions on the transfer of shares, these provisions will only take effect when clearly stated in the shares of the respective shares.

A joint-stock company has legal status from the date of issuance of the Certificate of Business Registration. Joint-stock companies have the right to issue shares, bonds, and other securities of the company.

There are many advantages of a JSC. The liability regime of a joint-stock company is limited liability, shareholders are only responsible for debts and other property obligations of the company within the scope of their contributed capital, so the risk level of shareholders is not high; The capital structure of a joint-stock company is very flexible, enabling many people to contribute capital to the company; The ability to raise capital of a joint-stock company is highly probable through the issuance of shares to the public or to the public, this is a unique characteristic of a joint-stock company;

The transfer of capital in a joint-stock company is relatively easy, there is no need to carry out procedures for changing shareholders with the Department of Planning and Investment, so the range of subjects allowed to join a joint-stock company is very wide. Even state and government officials and employees have the right to buy shares of joint-stock companies.

Along with the many advantages are the disadvantages of joint-stock companies. The management and operation of a joint-stock company are very complicated due to the number of shareholders can be very large, many people do not know each other, and there may even be a division into opposing groups of shareholders with personal agendas and benefits; The establishment and management of a joint-stock company are also more complicated than other types of companies because it is strictly bound by the provisions of law, especially the financial and accounting regimes. Only founding shareholders will display information on the national business registration system (if there is a transfer of shareholders, the founding shareholder will still have his or her name on the business registration, and will not lose it even though the transfer is complete. capital). The shareholders who contribute capital to each other do not have to carry out procedures to change the contents of business registration, only within the enterprise and not recorded on the enterprise registration system of the management agency. For a joint-stock company, when transferring shareholders, the personal income tax rate is 0.1% according to the securities transfer (even though the company has no profit), but this personal income tax rate is still applied.

  • Single Member Limited Liability Company 

A single-member limited liability company is an enterprise owned by an organization or individual (hereinafter referred to as the company owner). The company owner is responsible for the company's debts and other property obligations to the extent of the company's charter capital. A single-member limited liability company has legal status from the date of issuance of the Certificate of Business Registration. A single-member limited liability company may not issue shares, except for the case of conversion into a joint-stock company. Single-member limited liability companies may issue bonds in accordance with the Law on Enterprise and other relevant laws.

There are many advantages of running a single-member limited liability company. For instance, by having a legal status, members of the company are only liable or responsible for the company’s activities within the amount of capital contributed to the company so there is little to no risk for the owners. 

The organizational structure of the company is the simplest among other types of enterprises. The owner of the company has every right and full authority to decide on all matters related to the company’s operation. The owners themselves can also be in charge of the company’s company business accounting without the requirement to appoint or hire someone else. 

Apart from the advantages, there are drawbacks to running a single-member limited liability company. The capability of capital mobilization of a limited liability company is reduced since there is only one member and no right to issue shares and bonds. The owner's salary is not included in the expenses of the business.

  • Limited Liability Company With Two Or More Members 

A limited liability company with two or more members is an enterprise with between 02 and 50 members who are organizations or individuals. Members are responsible for debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except for the case specified in Clause 4, Article 47 of the Law on Enterprise. A member's capital contribution may only be transferred according to the provisions of Articles 51, 52, and 53 of the Law on Enterprise. A limited liability company with two or more members shall have legal status from the date of issuance of an enterprise registration certificate. A limited liability company with two or more members may not issue shares, except for the case of conversion into a joint-stock company. A limited liability company with two or more members may issue bonds in accordance with the Law on Enterprise and other relevant laws; the private placement of bonds must comply with the provisions of Articles 128 and 129 of the Law on Enterprise.

The advantages of a limited liability company with two or more members: Due to their legal status, company members are only responsible for the company's activities within the amount of capital contributed to the company, so they pose little risk to capital contributors;

The number of members of the company is not much and the members are usually acquaintances and trust each other, so the management and administration of the company is not too complicated;

The capital transfer regime is strictly regulated, so investors can easily control the change of members, limiting the penetration of strangers into the company.

The time limit for re-registration of capital when members have not yet contributed capital fully: 60 days from the last day to fully contribute capital.

When transferring capital, members transferring capital must declare tax and pay personal income tax.

The disadvantages of a limited liability company with two or more members 

Due to their legal status, company members are only responsible for the company's activities within the amount of capital contributed to the company, so they pose little risk to capital contributors;

The number of members of the company is not much and the members are usually acquaintances and trust each other, so the management and administration of the company is not too complicated;

The capital transfer regime is strictly regulated, so investors can easily control the change of members, limiting the penetration of strangers into the company.

The time limit for re-registration of capital when members have not yet contributed capital fully: 60 days from the last day to fully contribute capital.

A limited liability company is more strictly regulated by law than a sole proprietorship or partnership;

The capital mobilization of a limited liability company is limited because it does not have the right to issue shares.


II. Procedures for business registration 

1. Application for business registration

  • Private Business 
  1. Business registration application form 
  2. Copy of personal legal documents of the owner of the sole proprietorship
  • Partnership
  1. An application for enterprise registration.
  2. The company's charter.
  3. List of members.
  4. Copies of the following papers:
  • Legal papers of individuals for company members being individuals; Legal documents of the organization for members of the company being an organization; Legal documents of the individual for the authorized representative and the document appointing the authorized representative.
  • For members being foreign organizations, copies of legal papers of the organization must be consular legalized;
  • The investment registration certificate, for the case, that the enterprise is established or participated in the establishment by a foreign investor or a foreign-invested economic organization in accordance with the provisions of the Investment Law and other relevant documents; implementation manual.
  • Single-member Limited Liability Company
  1. An application for enterprise registration.
  2. The company's charter.
  3. Copies of the following papers:
  • Legal documents of the individual for the legal representative of the enterprise;
  • Legal papers of an individual, for the company owner being an individual; Legal papers of the organization for the company owner being an organization (except for the case where the company owner is the State); Legal documents of the individual for the authorized representative and the document appointing the authorized representative.

For the company owner who is a foreign organization, the copy of the legal papers of the organization must be consular legalized;

  • Investment registration certificate, in case the enterprise is established by a foreign investor or a foreign-invested economic organization according to the provisions of the Investment Law and its guiding documents.
  • Limited Liability Company With Two Or More Members 
  1. An application for enterprise registration.
  2. The company's charter.
  3. List of members, for limited liability companies with two or more members; the list of founding shareholders and the list of shareholders who are foreign investors for joint-stock companies.
  4. Copies of the following papers:
  • Legal documents of the individual for the legal representative of the enterprise;
  • Personal legal papers for company members, founding shareholders, shareholders being foreign investors who are individuals; Legal papers of the organization for members, founding shareholders, shareholders being foreign investors being organizations; Legal documents of individuals for authorized representatives of members, founding shareholders, shareholders being foreign investors being organizations and power of attorney documents of authorized representatives.

For members and shareholders being foreign organizations, copies of legal papers of the organization must be consular legalized;

  • Investment registration certificate, in case the enterprise is established or participated in the establishment by a foreign investor or a foreign-invested economic organization in accordance with the provisions of the Investment Law and other legal documents; implementation manual.
  • Joint-stock Company
  • An application for enterprise registration.
  • The company's charter.
  • List of members, for limited liability companies with two or more members; the list of founding shareholders and the list of shareholders who are foreign investors for joint-stock companies.
  • Copies of the following papers:
  • Legal documents of the individual for the legal representative of the enterprise;
  • Personal legal papers for company members, founding shareholders, shareholders being foreign investors who are individuals; Legal papers of the organization for members, founding shareholders, shareholders being foreign investors being organizations; Legal documents of individuals for authorized representatives of members, founding shareholders, shareholders being foreign investors being organizations and power of attorney documents of authorized representatives.

For members and shareholders being foreign organizations, copies of legal papers of the organization must be consular legalized;

  • Investment registration certificate, in case the enterprise is established or participated in the establishment by a foreign investor or a foreign-invested economic organization in accordance with the provisions of the Investment Law and other legal documents; implementation manual.

2. Competent Authority 

  1. An enterprise founder or an authorized person shall register an enterprise with the business registration authority by the following methods:
  • Register the business directly at the business registration agency;
  • Business registration via postal service;
  • Enterprise registration via an electronic information network.
  1. Enterprise registration via an electronic information network means that the founder of an enterprise submits an application for enterprise registration via the electronic information network at the National Enterprise Registration Portal. An enterprise registration dossier via an electronic information network includes data as prescribed by this Law and is presented in an electronic document. An enterprise registration dossier via an electronic information network has the same legal value as a paper business registration dossier.
  2. Organizations and individuals have the right to choose to use digital signatures in accordance with the law on electronic transactions or use business registration accounts to register businesses via electronic information networks.
  3. A business registration account means an account created by the National Information System on Business Registration and granted to individuals to carry out business registration via the electronic information network. Individuals who are granted a business registration account are responsible before the law for the registration to be granted and the use of the business registration account for business registration via the electronic information network.
  4. Within 03 working days from the date of receipt of the application, the business registration agency shall consider the validity of the enterprise registration dossier and grant the enterprise registration; in case the application is not valid, the business registration agency must notify in writing the contents to be amended or supplemented to the enterprise founder. In case of refusal to register an enterprise, it must notify in writing the enterprise founder and clearly state the reasons.

 

The article above contains information regarding the matter of “Guide to Register A Company in Vietnam”. For further information regarding corporate legal, please contact Doanh Tri Law Firm through the following means of communication: 

Hotline: (+84) 911.233.955

Email: luatdoanhtri@gmail.com 

Doanh Tri is always pleased to cooperate with our clients./




 

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